S&P: Mortgage default rate drops below 2% in July
The default rate on first mortgages dropped to 1.93% in July,
according to Standard & Poor's. S&P, in conjunction with the
consumer rating firm Experian, monitors the rate of defaults
within asset-backed securities. First mortgage defaults declined
from 2.02% in June and 3.24% one year ago. Second mortgage
defaults showed a steeper drop to a rate of 1.25% in July, down
from 1.4% the month before and 2.77% last year. Defaults actually
dropped across the entire ABS spectrum covered by the two firms,
reaching a composite default rate of 2.06% in July. It's down
more than a full percentage point from one year ago. While
defaults were down, delinquencies remained elevated. According to
Lender Processing Services, the delinquency rate on mortgages
went up by 2.4% in July. More than 4.4 million loans are
considered 30 days late or worse. Erkan Erturk, a credit analyst
at S&P, said "The firming of these rates suggests that consumers
continue to bolster their financial positions by paying down debt
and not incurring excessive charges despite elevated unemployment
and economic weakness, which we consider a positive for auto,
credit card, and other types of consumer ABS credit."
